The stakes are getting higher
Consumers increasingly factor environmental impact into their buying decisions and activist investors are waging campaigns based on environmental, social and governance (ESG) concerns. In fact, BlackRock Chairman and CEO Larry Fink said in his 2022 letter to CEOs, “most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonizing the global economy.”³
Meanwhile, ESG-focused activist campaigns nearly doubled in the 2022 proxy season, according to EY-Parthenon analysis. European regulations already encourage lower-carbon energy and industrial footprints, setting an emissions reduction target of 55% by 2030 compared with 1990 levels.
Current carbon offsets have questionable effectiveness
Executives have typically relied on emissions reduction efforts combined with a carbon credit system to offset their company’s carbon footprint. Sectors where CO2 abatement is difficult, including heavy industry and aviation, are already adopting new carbon-neutral fuels and buying offsets to negate their carbon footprints. However, it is not always clear how effective these carbon offsets are at mitigating climate change. Since participation in the market for these credits is largely voluntary, it varies significantly by sector, quality, and geography. Effective offsets, such as direct air capture into geological formations, are energy-intensive and expensive. Cheaper offsets, such as in forestry, require long-term management and may still be subject to land use changes or unforeseen fires that could negate them. Offset markets are a step in the right direction, but most depend on avoidance of otherwise burned fossil carbon or rely on impermanent atmospheric removal. In many cases, CEOs and their teams may be focused on cost rather than environmental impact. However, lower-cost and lower-quality offsets are far less likely to realistically meet climate objectives.
Three ways emerging carbon removal technologies can become revenue generators
Focusing on revenue growth instead of costs reveals a new path that executives can follow. Emerging carbon removal technologies have the potential to help companies meet both climate goals and business goals – and it’s already or showing positive results in industries like airlines and personal care.
Examples of such technologies include the following: